Fed Beige Book: Commercial Real Estate Activity Appears to be Strong

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Fed's Beige Book "Prepared at the Federal Reserve Bank of New York and based on information collected on or before October 5, 2015."

Reports from the twelve Federal Reserve Districts point to continued modest expansion in economic activity during the reporting period from mid-August through early October. The pace of growth was characterized as modest in the New York, Philadelphia, Cleveland, Atlanta, Chicago, and St. Louis Districts, while the Minneapolis, Dallas, and San Francisco Districts described growth as moderate. Boston and Richmond reported that activity increased. Kansas City, on the other hand, noted a slight decline in economic activity. Compared with the previous report, the pace of growth is said to have slowed in the Richmond and Chicago Districts. A number of Districts cite the strong dollar as restraining manufacturing activity as well as tourism spending. Business contacts across the nation were generally optimistic about the near-term outlook.

And on real estate:

Residential real estate activity has generally improved since the last report, with almost all Districts reporting rising prices and sales volume. One exception was the Chicago District, where prices and sales volume were generally steady. A number of Districts noted that the market for lower or moderately priced homes has outperformed the high end of the market. The inventory of available homes was reported to be low in the Boston, New York, Richmond, and St. Louis Districts; and San Francisco reported a shortage of available land in some areas. On the other hand, Philadelphia reported adequate inventories, and Dallas noted a fair amount of supply in the pipeline. Boston, New York, and Chicago indicated rising residential rents, while Minneapolis reported sharp declines in rents in energy-producing areas of North Dakota. Residential construction has been mixed but generally stronger in the latest reporting period, with multi-family outpacing single-family construction. Strong multi-family construction was highlighted in the New York, Cleveland, Richmond, and San Francisco Districts, while Atlanta reported strong residential construction generally. However, Minneapolis and Kansas City reported declines in new home construction. Philadelphia mentioned a lack of new construction, while Dallas reported that new construction has been restrained by labor shortages; Chicago indicated little change.

Commercial real estate markets have shown signs of strengthening in all twelve Districts. Most Districts noted improvement across all major segments, though New York and St. Louis noted some increased slack in the market for retail space. Commercial construction was also stronger in most Districts. Boston and St. Louis noted brisk construction in the health sector, including senior care facilities, and Cleveland also indicated strong demand for senior living structures. New York, on the other hand, noted some pullback in new commercial construction, though activity remained fairly brisk.

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